ITAT dismisses revenue's appeal on bogus purchases totaling Rs. 12,13,802 as genuine under CBDT Circular

The ITAT dismissed the revenue's appeal against the deletion of addition of bogus purchases, totaling Rs. 12,13,802, as genuine purchases. The appeal was found not maintainable under the CBDT Circular No. 3/2018 due to the tax effect not meeting the specified criteria. The ITAT held that the addition was not based on information from external law enforcement agencies as required by the circular, resulting in the dismissal of the revenue's appeal.

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Issues:
Appeal against deletion of addition of bogus purchases as genuine purchases.

Analysis:
1. The appeal was filed by the revenue against the order passed by the CIT(A)-12, Mumbai, regarding the addition of bogus purchases totaling Rs. 17,17,258. The original assessment was reopened under section 147 of the Income Tax Act, 1961 based on information about the alleged bogus purchase bills.

2. The Assessing Officer (A.O.) disallowed the entire amount of the impugned purchases due to the failure of the assessee to substantiate their genuineness. Consequently, the income of the assessee was assessed at Rs. 2,28,77,920.

3. The CIT(A) found that the A.O. did not properly consider the submissions made by the assessee. The CIT(A) allowed the claim that no transaction was made with one of the parties, Banjara Enterprises, and vacated the addition related to it. Regarding other purchases, the CIT(A) analyzed each transaction in detail and partially allowed the appeal by disallowing depreciation and certain purchase claims.

4. The revenue appealed the CIT(A)'s decision, arguing that the addition of Rs. 12,13,802 for bogus purchases should not have been deleted. The revenue claimed that the appeal was maintainable under the CBDT Circular No. 3/2018 based on the tax effect involved.

5. The authorized representative for the assessee contended that the exception in the circular did not apply as the addition was not based on external agency information. The ITAT observed that the reopening and addition were based on information from the DGIT(Inv.), Mumbai, not external law enforcement agencies as specified in the circular. Therefore, the appeal of the revenue was deemed not maintainable.

6. Consequently, the ITAT dismissed the revenue's appeal, stating that the tax effect involved did not meet the criteria specified in the CBDT circular for maintaining the appeal.

This detailed analysis covers the issues raised in the appeal, the assessment by the A.O., the CIT(A)'s decision, and the ITAT's final judgment based on the CBDT circular provisions.

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